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Reasons Why Life Insurance is a Smart Saving

20-10-2022 |

Looking after your family and watching over their financial needs are important responsibilities that keep evolving on a consistent basis. Hence a dynamic approach is needed to have sufficient funds ready to meet these obligations as and when they arise.
 

For instance, in a crisis such as the sudden hospitalisation of self or dependents, an immediate outflow of funds is necessary. Even the most well-thought-out plans can fail if the breadwinner of a family meets an untimely death or becomes permanently disabled, leading to a pause in the stream of income for the household.
 

What is Smart Life Insurance?
 


Life insurance is a financial product with time-tested benefits; it is a contract within which the policyholder agrees to pay a predefined premium regularly and upon the occurrence of a contingent event, the insurance company provides financial assistance as mandated under the terms of the policy. Life insurance policies have rescued many families from financial distress in the wake of the passing of the primary earning member.

 

The level of awareness of smart investments has risen tremendously in the past two decades. The role of a comprehensive insurance policy in an individual’s financial planning matrix is widely appreciated now. Thus, insurance companies have been offering an increasing variety of plans that can fulfil the financial objectives of an individual in addition to providing them with a life cover.
 

Therefore, smart life insurance consists of plans that have been designed to fulfil the financial requirements that arise during the different stages of an individual’s life, including the expenses associated with their wedding, the education of their children, and planned expenditures such as a dream vacation.
 

Furthermore, there are endowment plans and pension plans that provide regular income to help one manage long-term expenses such as caring for a disabled dependent or handling their post-retirement finances.
 

What Makes Life Insurance a Smart Saving Option?


An unfortunate event like death disturbs the equilibrium of the entire family. Therefore, it is wise to estimate your potential financial commitments at every stage in the family life cycle and save accordingly. It is also necessary to buy a term insurance plan with an adequate sum assured so as to provide financial assistance to your family after your demise.
 

Life insurance plans have several features which make them a smart saving, some of which are as follows.
 

  1. Due to the indemnity nature of the insurance contract, life insurance is an saving avenue with a relatively lesser outflow.
  2. Life insurance plans are of different types; in addition to pure term insurance plans, there are smart savings plans, returns plans, regular income plans, and wealth builder plans in the form of ULIP plans. Thus, you can choose a life insurance plan as per your financial needs.
  3. Life insurance plans offer flexibility in the premium payment mode, policy terms, payout frequency, and additional benefits through riders#. In many comparable schemes, such all-round flexibility is absent.
  4. Life insurance plans have policy terms ranging from 5 years to 25 years. Therefore, there is a plan for every medium-term and long-term financial need.
  5. The premium paid is relatively low, especially considering the inflation-adjusted returns under the plans.
  6. By incorporating features such as joint life coverage, critical illness, permanent disability, medical opinion and case management to the plan, enhanced coverage can be attained.
  7. Life insurance premium payments qualify for a tax * deduction up to ₹1,50,000 under Section 80 C of the Income Tax * Act, 1961.
  8. The ULIP schemes that combine investment with life coverage are an easy method to invest in the equity market. For a novice who does not know how to track the market for profit-making equities, the ULIP route is advisable because of its relative ease and safety. It is important to note that debt-based ULIP schemes offer better yields compared to pure deposit instruments.
     
ULIPs: The Truly Smart Investment


Unit Linked Insurance Plans (ULIPs) are versatile savings instruments that offer the dual benefits of an insurance cover and the opportunity to build substantial wealth. The premium paid is partly allocated towards life coverage and partly invested in carefully chosen funds to derive the apt returns from the equity and debt markets. Thus, a ULIP plan is a systematic channel to contribute a fixed sum over a long period.
 

You can choose the kind of fund you wish to participate in in accordance with your risk appetite. If you have a more risk appetite, you can choose equity-linked plans. If you are looking to build a stable endowment fund and have capital protection as the prime objective, you can choose debt-oriented funds. You can also choose hybrid funds.
 

In case you wish to switch funds based on conditions or a change in your risk appetite, you can do so. The insurer deducts a fixed amount as ULIP charges for managing the fund and if you move out of a ULIP plan after the mandatory lock-in period or switch between funds, ULIP charges will be levied. Here are some of the features of a ULIP plan.
 

  1. You pay an annual premium for a fixed number of years.
  2. The dependents will receive a lump sum benefit on the death of the policyholder.
  3. On the maturity of the policy, market-linked returns are likely to have led to substantial capital appreciation.
  4. Plan coverage is available for 30 to 40 years and up to the maximum age of 100 years.
  5. Accidental death, critical illness, and hospitalisation care are some of the riders# available.


Tata AIA Life Insurance has more than ten funds from which you can choose the ULIP fund you wish to invest in. Tata AIA offers comprehensive plans which are a pre-set combination of a ULIP and two comprehensive health-based riders# to offer you all-round coverage.
 

The process of purchasing such a comprehensive plan is quite simple. You can visit the company’s website and use the online interface to assess various plans. The wide range of online calculators will help you determine the amount of coverage and investment you need to reach a certain financial goal.
 

Once you submit the required document and they get verified, you can pay the premium. The TATA AIA policy payment can be made online and the policy documents are delivered to your email address.
 

Conclusion


In uncertain times like the ongoing pandemic, having a sound savings plan that helps you build wealth and ensures financial assistance for your family is a necessary investment. In this context, ULIP plans are a prudent investment avenue that you can opt for. It is easy to purchase a ULIP plan online; however, you must read the information brochure carefully to choose a plan according to your requirements and risk appetite.
 

L&C/Advt/2022/Oct/2620

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Tata AIA Life Insurance

A joint venture between Tata Sons Pvt. Ltd. and AIA Group Ltd. (AIA),  Tata AIA Life Insurance  is one of the leading life insurance providers in India. We post everything you need to know about life insurance, tax savings and a variety of lateral topics such as savings and investments in this space. You can access and read a host of different blogs, articles and pages at the Tata AIA Life Insurance Knowledge Center or get in touch with us with any queries or questions!

View all posts by Tata AIA Life Insurance

Disclaimers

  • Insurance cover is available under the product.
  • The products are underwritten by Tata AIA Life Insurance Company Ltd.
  • The plans are not a guaranteed issuance plan, and it will be subject to Company’s underwriting and acceptance.
  • For more details on risk factors, terms and conditions please read sales brochure carefully before concluding a sale.
  • This blog is for information and illustrative purposes only and does not purport to any financial or investment services and do not offer or form part of any offer or recommendation. The information is not and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.
  • Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company.
  • Every effort is made to ensure that all information contained in this blog is accurate at the date of publication, however, the Tata AIA Life shall not have any liability for any damages of any kind (including but not limited to errors and omissions) whatsoever relating to this material.
  • *Income Tax benefits would be available as per the prevailing income tax laws, subject to fulfilment of conditions stipulated therein. Income Tax laws are subject to change from time to time. Tata AIA Life Insurance Company Ltd. does not assume responsibility on tax implications mentioned anywhere in this document. Please consult your own tax consultant to know the tax benefits available to you.
  • #Rider is not mandatory and is available for a nominal extra cost. For more details on benefits, premiums, and exclusions under the Rider, please contact Tata AIA Life's Insurance Advisor/ branch.
  • THE LINKED INSURANCE PRODUCT DO NOT OFFER ANY LIQUIDITY DURING THE FIRST FIVE YEARS OF THE CONTRACT. THE POLICY HOLDER WILL NOT BE ABLE TO SURRENDER/WITHDRAW THE MONIES INVESTED IN LINKED INSURANCE PRODUCTS COMPLETELY OR PARTIALLY TILL THE END OF THE FIFTH YEAR.
  • Past performance is not indicative of future performance.
  • All investments made by the Company are subject to market risks. The Company does not guarantee any assured returns. The investment income and price may go down as well as up depending on several factors influencing the market.
  • Please make your own independent decision after consulting your financial or other professional advisor.